- October 19, 2018
- Posted by: Midridge International
- Category: Blog, SME
As a small business owner, a deep understanding of your company’s financial situation drastically improves your chance of long-term success. When you know exactly where you stand in terms of your financials, you can plan for the future and avoid common financial management pitfalls.
Here are some tips for Small Business Owners to take control of business finances, improving financial literacy and taking your company to the next level:
3. Bone-up on the basics (at the very least). Even if you have a professional helping you with your finances, you still need to understand them. Know how to read – and make use of – income statements and balance sheets, understand your inventories, and learn how to manage your cash flow and supply chain.
4. Know where you stand. Educate yourself on your marketplace. Analyze your competitors and ascertain how your company stacks up against them in terms of goods, services, and pricing. Determine competitors’ strengths and weaknesses and identify opportunities therein. Additionally, work on deepening your understanding of your customers and figure out if they could and would spend more for what you provide. All you have to do is ask.
5. Establish priorities. Making a profit is an obvious goal, but what else should you aim to accomplish? Do you want to see your product on every shelf or only in select boutique stores? Do you want to expand or franchise your services or keep your company small in order to provide customized experiences to those willing to pay for them? Identifying your priorities will help determine the future course of your business, and the correct costs for your products or services.
6. Find a professional you trust. Everyone needs a second opinion. Even if you can only afford a professional’s expertise on a part-time basis, accountants and bookkeepers are invaluable partners who can help you understand where your business is and where it is headed. They will use the data from your financial management tools, analyze it, and work with you to provide an overview of your needs.
7. Determine your worth. How do you price your products or services and how much does an hour of your time cost? These questions confuse most entrepreneurs. Unfortunately, many business owners guess incorrectly and assign arbitrary numbers. In fact, one in four small business owners (27 per cent) believe they may be undercharging based on the high level of value they provide and are therefore impacting their overall profitability and chances for long-term success.
Worth isn’t just about price or what to charge – it’s about the true value of your business, which involves a combination of factors: your products, services, competitive landscape, and the value your business brings to customers. By educating yourself on your financials, and working with the correct tools and credible professionals, you’ll be on your way to a lifetime of success – without leaving anything to chance.
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